Gold May Fall on Speculation Fed’s Easing to Miss Expectations

Gold may decline in London on speculation that a second round of quantitative easing by the Federal Reserve may miss investors’ expectations.

The Fed today will likely pledge to buy $500 billion or more in securities, according to 29 of 56 economists surveyed by Bloomberg News. The dollar may strengthen as the Fed announces a smaller increase in asset purchases than many investors expect, Barclays Capital strategist Aroop Chatterjee said yesterday. Barclays forecast purchases of $60 billion a month for six months. Gold usually moves inversely to the greenback.

“Pressure could be applied by the possibility that the quantitative easing implementation is smaller than anticipated,” Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said in a report.

Immediate-delivery bullion lost $2.90, or 0.2 percent, to $1,354.55 an ounce at 9:21 a.m. in London. Prices reached a record $1,387.35 on Oct. 14. The metal for December delivery was 0.2 percent lower at $1,354.50 on the Comex in New York. Futures reached a record $1,388.10 on Oct. 14.

Gold, up 23 percent this year, is heading for a 10th annual gain, the longest winning streak since at least 1920. Precious metals have outperformed global equities, Treasuries and most industrial metals this year as central banks maintained low interest rates and governments spent trillions of dollars to spur growth.

The Fed bought $1.7 trillion in debt from December 2008 to March. Concern about possible further monetary easing in the U.S. has supported gold prices. The dollar was little changed against the euro today.

‘Negative Impact’

“Talk of quantitative easing has already been reflected in gold prices,” said Seo Jun Mo, a senior trader at KB Futures Co. in Seoul, referring to the Fed’s possible bond purchases. If the amount “falls short of market expectations, that will have a negative impact on gold.”

Gold assets in exchange-traded products declined for a 13th day yesterday, falling 0.87 metric ton to 2,086.53 tons, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,104.65 tons on Oct. 14.

A gold deposit with proven reserves of at least 100 tons has been found in China’s Inner Mongolia region, Xinhua News Agency reported today, citing Huang Zhiquan, chief engineer of the armed police detachment in charge of minerals exploration.

Silver for immediate delivery in London lost 0.3 percent to $24.825 an ounce. The metal climbed to a 30-year high of $25.0525 on Nov. 1. It reached an all-time high of $50.35 in New York in 1980, a year after the Hunt brothers tried to corner the market.

Palladium fell 0.7 percent to $640.90 an ounce after yesterday reaching $657.50 for a second day, matching the highest price since May 2001. Platinum declined 0.3 percent to $1,713.25 an ounce.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE